Correlation Between National Storage and Zhihu

Can any of the company-specific risk be diversified away by investing in both National Storage and Zhihu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining National Storage and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Storage REIT and Zhihu Inc ADR, you can compare the effects of market volatilities on National Storage and Zhihu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in National Storage with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Zhihu.

Diversification Opportunities for National Storage and Zhihu

0.24

Correlation Coefficient

National Storage  Zhihu

Modest diversification

The 3 months correlation between National and Zhihu is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR and National Storage is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on National Storage REIT are associated (or correlated) with Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of National Storage i.e., National Storage and Zhihu go up and down completely randomly.

Pair Corralation between National Storage and Zhihu

Assuming the 90 days horizon National Storage REIT is expected to generate 0.96 times more return on investment than Zhihu. However, National Storage REIT is 1.04 times less risky than Zhihu. It trades about 0.02 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about -0.03 per unit of risk. If you would invest  140.00  in National Storage REIT on October 23, 2024 and sell it today you would earn a total of  4.00  from holding National Storage REIT or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.79%
Values	Daily Returns

National Storage REIT  vs.  Zhihu Inc ADR

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, National Storage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Zhihu Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhihu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Zhihu is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with National Storage and Zhihu

The main advantage of trading using opposite National Storage and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage position performs unexpectedly, Zhihu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhihu will offset losses from the drop in Zhihu's long position.

The idea behind National Storage REIT and Zhihu Inc ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.